Quantitative Asset and Liability Modelling 1 - ACST816

This unit examines: utility theory and simple asset allocation; mean-variance portfolio theory; the capital asset pricing model; measures of investment risk; single and multifactor models; arbitrage pricing theory; and the efficient market hypothesis. With the introduction of derivatives – forwards, futures and options – the single period binomial option pricing model (discrete time model) and the Black-Scholes option pricing model (continuous time model) are covered for European, American and exotic options. Stochastic interest rates and moments of the accumulation of annuities are also studied. Students gaining a grade of credit or higher in both ACST816 and ACST817 are eligible for exemption from subject CT8 of the professional exams of the Institute of Actuaries of Australia.